Are you a business that has had a GST refund held up as a part of the ATO’s risk assessment program to verify GST refunds? The Inspector-General of Taxation (IGT) has recently completed and released his review into ATO’s practice and the findings are surprisingly good for the ATO. Even so, as a part of the review, the IGT made several recommendations to improve the process which the ATO has mostly agreed to.

If you’re having issues with your activity statements or a GST issue in general, contact us today.

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Businesses that satisfy a certain turnover threshold may qualify as a small business entity. The advantages of being a small business entity includes access to a range of tax concessions including lower tax rates, capital allowance concession, trading stock concession, as well as FBT and GST concessions.

If you think your business is a small business entity or if you’re thinking of starting a small business, no matter what stage of the life cycle your business is in, we can help you maximise the tax concessions available to you.

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If you’re running a foreign business that supplies low-value goods to Australia, you may be caught in the GST net from 1 July 2018. From that date the ATO will be using a number of information resources to find non-compliant businesses including:

• financial data tracking that follows the flow of funds from purchasers to suppliers overseas;
• customs data on details of imports into Australia;
• information from other countries obtained through information sharing arrangements;
• online investigations to identify websites and businesses involved in supplying goods to consumers in Australia; and
• reports of non-compliance from individuals or businesses.

According to the ATO, it will treat businesses differently based on their compliance category. Those businesses that are “willing to do the right thing” or are “mostly compliant” will not be contacted unless there is a mistake made, and no penalties will be imposed from 1 July 2018 to 30 June 2019.

However, those businesses that are “partly compliant” or are completely non-compliant can expect the ATO to register the business for GST, calculate their liability and issue an assessment. An additional 75% administrative penalty will also be imposed (higher penalties can apply if the business is a “significant global entity) and debt recovery action will be initiated.

What legal recourse will the ATO have against non-complying businesses that are based in foreign jurisdictions and have no physical presence here, you may think. Well, according to the ATO, when the 75% (or more) administrative penalty is imposed, and becomes legally payable, it can then register a debt in a court in the business’ home jurisdiction. The ATO can also request the taxation authority in the foreign jurisdiction to recover the debt on their behalf, and may intercept funds from Australia that are destined for the business.

While these enforcement mechanisms seem robust, it should be noted that the court systems in every country differs and varies in complexity as well as time it takes to get a judgment. If the ATO chooses to go down that route, it may be mired in many procedural legal actions in foreign jurisdictions for a long time to collect a disproportionate amount of GST revenue.

Unless Australia already has an agreement with a foreign jurisdiction in relation to the collection of debts, it may be difficult to convince a foreign taxation authority of enforcement, and with the rise of so many different methods of payment over the internet, the ATO may also find it difficult to intercept payments over so many different channels.

This carrot and stick approach may work for bigger players based in western countries, but what about small to medium enterprises that are selling to Australia based in emerging economies in Asia or South America? It is one thing to identify businesses in foreign jurisdictions that are non-compliant, it may be an entirely different issue where actual enforcement is involved.

The post Are you ready for GST on low-value goods? appeared first on The Accounting Division.

In a bid to tackle non-compliance of GST obligations from developers selling properties, the government has introduced a new measure that require buyers of new residential premises and subdivisions of potential residential land to make a payment of part of the purchase price to the ATO. This measure has been introduced in response to developers who sell properties at a price that reflects their GST obligations but dissolving their businesses before BAS lodgement to avoid passing the GST to the ATO.

The scale of the problems has grown significantly in the last decade and within the last 5 years these insolvent entities were responsible for around $1.8bn in debt written off, and at the same time claimed around $1.2bn in input tax credits. It is hoped that with the buyer remitting payment directly to the ATO instead of the developer as a part of the settlement process, less intensive compliance action will need to be taken and more GST revenue will flow into government coffers.

The proposed law does not apply to commercial residential premises or those new residential premises created through substantial renovation. It only applies to sales and long-term leases of new residential premises and potential residential land. Therefore, if you purchase such a property, you have an obligation to make a payment.

In a majority of cases, the payment to the ATO will need to be made on or before the date of settlement. The payment is dependent on the contract price for the property and differs based on whether or not the margin scheme applies. If the margin scheme does not apply, the purchaser must withhold 1/11th of the contract price. If the margin scheme does apply, the purchaser would usually have to withhold 7% of the contract price. This seems complicated, but in practice, the seller has to the responsibility to notify the buyer with the relevant details such as whether withholding is required and the percentage to withhold.

In theory, this measure is said to have little or no impact on developers or sellers. However, in reality, it is not known whether some developers may increase the costs of these new properties to cover the immediate cash shortfall they may experience. This coupled with an increase in complexity for buyers and their conveyancers could unintentionally lead to negative consequences for the housing market.

If you’re thinking of purchasing a new property it may be advantageous to get enter into a contract before 1 July 2018 so you do not have to deal with the uncertainty surrounding these proposed rules. However, these changes are complex so if you’re unsure about what to do we’re here to provide you with up-to-date advice for your purchase or potential purchase.

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